Five things to watch for in Cuomo's budget

ALBANY—Many of the major parameters that Gov. Andrew Cuomo will announce in his executive budget proposal on Tuesday afternoon are already known: continued growth in Medicaid and education spending, a suite of tax cuts worth $2 billion over the next several years and a to-the-bone spending posture that holds state agency budgets flat for at least the third year in a row.

Several other ideas, like a state hotline for sexual harassment complaints, a statewide database of medical records and $4 million for a new office to police campaign finance laws and eventually set up a system of public matching funds, have appeared in newspapers in the days ahead of Cuomo's speech.

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But there are several key questions that will determine just exactly how the Democratic governor will pay for the programs in his election year spending document, some of which are beyond his control. Here are five things to watch for in today's presentation:

Federal money from a Medicaid waiver: After they enacted a number of changes designed to bend the long-term cost curve of the state-federal Medicaid program, New York officials applied for a federal waiver that would let the state invest $10 billion of $17 billion in savings over the next five years. The state sent its application in 2012, and updated it in December, but so far the federal government hasn't signed off, and the state's financial plans haven't assumed any savings.

Cuomo has said that he could flip what is currently projected as a $1.7 billion deficit for the next fiscal year into a $2 billion surplus by 2016, provided he can hold state spending growth to two percent or less. That's going to be quite difficult, fiscal analysts note, as the state has already committed to spending increases for education and health programs.

“Two percent growth in state operating funds yields the 'surplus' he's talking about. The question, though, is that 40 percent of that is Medicaid and school aid, and those are assumed to increase at four percent each year, and in Albany, those are seen not as caps, but floors,” said E.J. McMahon, president of the business-backed Empire Center. “So if that's off-limits to reduction, it's very difficult to see how everything else gets reduced enough to hold that two percent line.”

Enter the waiver. If the state were able to count on the additional federal revenue, it could direct some of its own money elsewhere.

Casino licensing fees: In his State of the State presentation, Cuomo said he hoped a commission would select proposals for the site of up to four Upstate casinos by this summer, with shovels hitting the ground before Election Day. And with that ambitious timetable comes the possibility of up-front payments from the winning bidders, which could fall into the coming fiscal year.

The state is already $203.4 million ahead of where it planned to be on the gambling front, a recent cash report by the Office of the State Comptroller showed. That one-time infusion came from settlements with Indian tribes who run upstate gambling halls; the new budget could include a higher number in recurring payments from tribal and non-tribal casinos, as well as a quick burst of up-front fees.

Sweeps: The state budget in recent years has utilized transfers from the New York Power Authority and a draw-down of reserves from the State Insurance Fund, which covers workers compensation claims, to cover deficits. New York has also booked revenue from the privatization of GHI, which has yet to happen.

Funding for pre-K: Cuomo said in his State of the State speech that he'd like to expand pre-Kindergarten programs statewide, but did not specifically say how he would pay for it. The governor has said he expects overall education spending to rise by "close to five percent," breaking through a self-imposed cap.

As Capital has reported, there was money left on the table in earlier competitive funding processes for education programs, which could also be part of a new funding stream for pre-K.

The governor also said he would push for a $2 billion bond issue, which the book accompanying his State of the State address said could be used, in part, to pay for pre-K facilities as well as technology upgrades.

The millionaires tax: The new financial plan that will accompany the budget will include projections into the 2017-2018 fiscal year, when a current set of tax rates is set to expire. Will Cuomo assume the top rates should continue, or let them lapse (along with trims to middle-class rates that were first enacted in December of 2011)?